An out-of-control shadow banking system that's been barely reformed. A housing sector that's been booming but seems primed for a bust. And despite a recent election that seemed to make it clear who was in charge, gridlock and short-term thinking appear to be hobbling the country's political elite. 

I'm talking, of course, about ... China. Well, not me so much as Fitch Ratings, which has turned just a bit bearish on Chinese debt. Why did Fitch downgrade their debt?  

China's growth since the re-launch of market-based economic reform in 1992 has been globally as well as domestically transformative. However, the investment-led growth model faces tightening constraints as the share of investment in GDP approaches the level of domestic savings. The process of rebalancing the economy towards consumption could lead to the economy's performance becoming more volatile.

Some underlying structural weaknesses weigh on China's ratings. Average income at USD 5,988 in 2012 and the overall level of development remain well below 'A' medians despite China's phenomenal growth. Standards of governance lag 'A' range norms according to the World Bank's assessment framework....

Risks over China's financial stability have grown. Credit has grown significantly faster than GDP since 2009. China experienced the second-fastest expansion of credit in real terms, behind only Qatar, between end-2009 and end-June 2012. The stock of bank credit to the private sector was worth 135.7% of GDP at end-2012, the third-highest of any Fitch-rated emerging market.

Fitch believes total credit in the economy including various forms of "shadow banking" activity may have reached 198% of GDP at end-2012, up from 125% at end-2008. Only 55% of new social financing took the form of bank lending in the 12 months to February 2013, down from 76% in 2009. The proliferation of other forms of credit beyond bank lending is a source of growing risk from a financial stability perspective....

The ratings assume there is no significant deterioration of geopolitical risk, for example a conflict between China and Japan or an outbreak of war on the Korean peninsula.

Well, to be fair, despite daily headlines to the contrary, the chance of war breaking out on the Korean peninsula still seems pretty remote. Still, the Financial Times puts this downgrade in context

China has faced concerns over debt levels since 2009 when state-owned banks unleashed a surge of loans to power the economy through the global financial crisis. The credit wave succeeded in keeping Chinese growth on track, but it led to bubbly housing prices and also saddled local governments with mountains of loans that they are still struggling to repay.

Beijing has spent the past three years trying to manage these problems. It has waged a long campaign to rein in the real estate sector, raising mortgage downpayments and barring people from buying second homes in the hottest markets. Partly as a result, China recorded its lowest annual growth rate for a decade last year.

Reuters tells a similar tale on China's shadow banking system.   

China's banks are feeding unwanted assets into the country's "shadow banking system" on an unprecedented scale, reinforcing suspicions that bank balance sheets reflect only a fraction of the actual credit risk lurking in the financial system....

But the key question is no longer how much risk banks are carrying. Rather, it's how many risky loans have been shifted to the lightly regulated shadow banking institutions - mainly trust companies, brokerages and insurance companies.

The risk to the overall financial system is not clear, because of insufficient data about the quality of credit in the shadow banking sector.

To be fair to Chinese authorities, they're quite aware of what they're going through. Indeed, the entire China 2030 exercise, as well as last month's China Development Forum, is predicated on the notion that China's growth model needs to change. But as Martin Wolf notes in his column, as China enters "middle income trap" territory, there are significant problems with such reforms: 

First, if expected growth falls from over 10 to, say, 6 per cent, the needed rate of investment in productive capital will collapse: under a constant incremental capital output ratio the fall would be from 50 per cent to, say, 30 per cent of GDP. If swift, such a decline would cause a depression, all on its own.

Second, a big jump in credit has gone together with reliance on real estate and other investments with falling marginal returns. Partly for this reason, the decline in growth is likely to mean a rise in bad debts, not least on the investments made on the assumption that past growth would continue. The fragility of the financial system could increase very sharply, not least in the rapidly expanding “shadow banking” sector.

Third, since there is little reason to expect a decline in the household savings rate, sustaining the envisaged rise in consumption, relative to investment, demands a matching shift in incomes towards households and away from corporations, including state enterprises. This can happen: the growing labour shortage and a move towards higher interest rates might deliver it smoothly. But, even so, there is also a clear risk that the resulting decline in profits would accelerate a collapse in investment.

I'd add only two things at this point. First, as far as I'm concerned, one of the great mysteries in comparative political economy is why it's so bloody difficult for countries like Germany, Japan, and China to change their growth models. High-saving export-oriented economies don't change their ways all that much. To be fair, neither do low-saving, high import countries like the United States. This could be a "varieties of capitalism" story, but that seems ... inadequate as an explanation. 

Second, it's worth remembering that the conventional wisdom about China's government was that annual growth below eight percent a year would spell trouble for the government. The implicit contract over the past three decades was that the Chinese Communist Party would supply the growth in return for political quiescence. The end of high growth would imply that this social contract is in trouble.

Except that China's growth has been below that rate for the last two years and running. During that time, Beijing has weathered one major political scandal, a raft of minor political scandals, and a leadership transition without a hint of regime collapse. So while China's economy does seem to merit greater attention, I'm not sure that China's political economy will trigger the kinds of instability that have been predicted for so long. 

What do you think? 

Posted By Daniel W. Drezner

Foreign policy wonks and international relations scholars have summer daydreams just like everyone else.  So I can only imagine what my colleagues thought when they read about the latest TV special in Pyongyang:

After a failed missile launching, aborted diplomacy with Washington, and continuing international pressure over the country’s nuclear program, North Korea’s untested young leader has tried once again to take a dramatic step with his isolated, impoverished nation, this time with a bit of unapproved help from Mickey Mouse and Winnie the Pooh.

North Korean state-run television on Monday showed footage of costumed versions of Tigger, Minnie Mouse and other Disney characters prancing in front of the leader Kim Jong-un, and an entourage of clapping generals.

The footage also showed Mr. Kim in a black Mao suit watching as Mickey Mouse conducted a group of young women playing violins in skimpy black dresses. At times, scenes from the animated Disney movies “Dumbo” and “Snow White and the Seven Dwarfs” were projected on a multipanel screen behind the entertainers; an article in the state-run press said unnamed foreign songs were on the bill.

The appearance of the characters from the United States, North Korea’s mortal enemy, was remarkable fare on tightly controlled North Korean television, which usually shows more somber and overtly political programs. A Disney spokeswoman, Zenia Mucha, had no comment Monday beyond a statement: “This was not licensed or authorized by the Walt Disney Company.”....

The performance was not the first time the Kim dynasty’s fate had been entwined with Disney. In 2001, the current leader’s older brother, Kim Jong-nam, was apparently banished from the line of succession after being detained by the Japanese authorities while trying to enter Japan on a Dominican Republic passport to visit Tokyo Disneyland.

If you look at Sky News' YouTube clip of the show, it does seem like there's a whole Disney Princess theme going on as well: 

 

 

The BBC reports that this production "seems to point to an easing of North Korea's paranoia about what it calls spiritual pollution from the West."  Or... a Kim obsession with Disney.  Take your pick. 

In full summer daydream mode, I think this is an outstanding opportunity to pursue unconventional statecraft towards Pyongyang.  Clearly, there's something about Disney that renders the Kim family weak at the knees.  Clearly, the best way to exploit this vulnerability is to have the State Department commission Disney to make a film containing Zoolander-like subliminal images that target the Kim family in particular to subvert their own regime.  We know (sorta) that Disney has done this before.  We know that even someone as wide-eyed as Katy Perry can be weaponized.  Why shouln't the United States exploit its soft power and deploy the Disney Gambit against the Kims? 

Because it's the summer and I'm lazy In the interest of participatory policymaking,  I hereby encourage readers to submit their own plots and subliminal messaged ideas in the comment stream.  Let's make this manipulation of Kim Jong Un a reality! 

Your humble blogger has been banging on about how China's weaknesses are significant and its strengths have been badly overestimated.  So you would think I'd be happy to read this Edward Wong front-pager for the New York Times:

After the economies of Western nations imploded in late 2008, Chinese leaders began boasting of their nation’s supremacy. Talk spread, not only in China but also across the West, of the advantages of the so-called China model — a vaguely defined combination of authoritarian politics and state-driven capitalism — that was to be the guiding light for this century.

But now, with the recent political upheavals, and a growing number of influential voices demanding a resurrection of freer economic policies, it appears that the sense of triumphalism was, at best, premature, and perhaps seriously misguided. Chinese leaders are grappling with a range of uncertainties, from the once-a-decade leadership transition this year that has been marred by a seismic political scandal, to a slowdown of growth in an economy in which deeply entrenched state-owned enterprises and their political patrons have hobbled market forces and private entrepreneurship.

“Many economic problems that we face are actually political problems in disguise, such as the nature of the economy, the nature of the ownership system in the country and groups of vested interests,” said Zhang Ming, a political scientist at Renmin University in Beijing. “The problems are so serious that they have to be solved now and can no longer be put off.” 

Wong didn't even delve into the state of China's big banks, which Bloomberg's Jonathan Weil examines and concludes that they're facing a world of hurt, or China's civil-military conundrum, which I blogged about earlier in the week. 

So China is doomed, right?  The bubble is gonna pop big time, right? 

Well... maybe.  Whenever I get too bearish on Beijing, two things drag me back from the brink:  1) China's sheer size means it can muddle through and still increase its relative power; and 2) it's possible for China to experience a severe downturn and still recover quite nicely.  As I pointed out a few years ago:

[I look] at China and see the parallels with America's rise to global economic greatness during the late 19th and early 20th centuries. From an outsider's vantage point, America looked like a machine that could take immigrants and raw materials and spit out manufactured goods at will. By 1890, the U.S. economy was the largest and most productive in the world. As any student of American history knows, however, these were hardly tranquil times for the United States. Immigration begat ethnic tensions in urban areas. The shift from an agrarian to an industrial economy led to fierce and occasionally violent battles between laborers, farmers, and owners of capital. With an immature financial sector, recession and depressions racked the American economy for decades.

It is not contradictory for China to amass a larger share of wealth and power while still suffering from severe domestic vulnerabilities.

China-watchers tend to be divided between the Bubblers and the Extrapolators.  I'm still more sympathetic to the Bubblers, but if the "China is doomed" meme goes mainstream, I might have to defect. 

Buried within James Risen's interesting New York Times front-pager about the easing of Iran tensions is an even more interesting story about the deep weirdness that is going on within Israel's national security establishment on Iran: 

At the same time in Israel, the conservative government of Prime Minister Benjamin Netanyahu has been rocked by a series of public comments from current and former Israeli military and intelligence officials questioning the wisdom of attacking Iran.

The latest comments came from Yuval Diskin, the former chief of Shin Bet, Israel’s domestic security service, who on Friday said Mr. Netanyahu and Defense Minister Ehud Barak should not be trusted to determine policy on Iran. He said the judgments of both men have been clouded by “messianic feelings.” Mr. Diskin, who was chief of Shin Bet until last year, said an attack against Iran might cause it to speed up its nuclear program.

Just days before, Israel’s army chief of staff suggested in an interview with the Israeli newspaper Haaretz that the the Iranian threat was not quite as imminent as Mr. Netanyahu has portrayed it. In his comments, Lt. Gen. Benny Gantz suggested that he agreed with the intelligence assessments of the United States that Iran has not yet decided whether to build a nuclear bomb.

Iran “is going step by step to the place where it will be able to decide whether to manufacture a nuclear bomb. It hasn’t yet decided whether to go the extra mile,” General Gantz told Haaretz. He suggested that the crisis may not come to a head this year. But he said, “Clearly, the more the Iranians progress, the worse the situation is.”

Last month, Meir Dagan, the former chief of the Israeli spy agency Mossad, said he did not advocate a pre-emptive Israeli strike against Iran’s nuclear program anytime soon. In an interview with CBS’s “60 Minutes,” Mr. Dagan said the Iranian government was “a very rational one,” and that Iranian officials were “considering all the implications of their actions.”

As someone who thought the Iran rhetoric coming from Jerusalem was decidedly overheated, I nevertheless have more mixed feelings about these developments than, say, Peter Beinart.  What's disturbing is that even though Israel's actual opposition party is evincing many of the same sentiments as the former military officers quoted above, they are not the ones moving the policy debate -- it's the ex-military/intel guys. 

That's a problem.  As much as candidates for higher office like to talk about "consulting the commanders on the ground" and the like, big decisions about national security policy should be the province of elected leaders.  Civilians need to be in control of these decisions -- the moment that elected leaders give up this control, then the voters have forfeited the most vital decisions of a republic.  This is why, in the United States, one of the rare sources of continuing bipartisan agreement is that when military commanders voice their policy opinions to the press in a way that contradicts the President, they need to be canned

Now, recently retired military and intelligence officials are in a slightly different category, but there's still a danger here.  I respect that these ;people should have a voice, particularly if they feel their country is on the precipice of a policy disaster -- but should their voice be louder than that of the main opposition party?  I don't think so, and it's a sign that there's a problem with Israeli democracy if that's the case.  I don't think this is entirely the fault of ex-IDF and Shin Bet leaders, mind you -- Netanyahu and Barak are part of the problem as well.  Still, at least the latter people won elections and must go back to the voters again. 

Developing... in a  very problematic manner. 

Posted By Daniel W. Drezner

When we last left off with Bo Xilai, he and his family were in a spot of trouble for myriad crimes and misdemeanors in Chongqing, including the possible poisoning of a British national.  According to this New York Times story by Jonathan Ansfield and Ian Johnson, however, that's just the beginning of Bo's crimes:

When Hu Jintao, China’s top leader, picked up the telephone last August to talk to a senior anticorruption official visiting Chongqing, special devices detected that he was being wiretapped — by local officials in that southwestern metropolis.

The discovery of that and other wiretapping led to an official investigation that helped topple Chongqing’s charismatic leader, Bo Xilai, in a political cataclysm that has yet to reach a conclusion.

Until now, the downfall of Mr. Bo has been cast largely as a tale of a populist who pursued his own agenda too aggressively for some top leaders in Beijing and was brought down by accusations that his wife had arranged the murder of Neil Heywood, a British consultant, after a business dispute. But the hidden wiretapping, previously alluded to only in internal Communist Party accounts of the scandal, appears to have provided another compelling reason for party leaders to turn on Mr. Bo.

This is both interesting and unsurprising.  The leadership in Beijing has every incentive to tar and feather Bo to ensure that his residual popularity in Chongqing does not lead to a revival in his power.  It's now gotten to the point where Bo's son had to issue a statement to the Harvard Crimson in an attempt to shed the image of being a spoiled princeling driving around in a red Ferrari.   I don't doubt the wiretapping story, but let's face it, Beijing's ruling cliques are going to have an incentive to... let's say embellish Bo's perfidy.  

And we here at Foreign Policy want to help!! 

At this point, the accusations being hurled at Bo Xilai, his wife, and his son are flying so fast and furious that the hashtag #BoXilaicrimes is now rising on Twitter.  Look at the list yourself -- here are my faves so far: 

RT : Guess who's the final cylon?

RT : Shot the deputy 

RT : Created Jar Jar Binks. 

RT @_dpress  Tore Jeremy Lin's meniscus 

RT : Cancelled Firefly.

RT : Designed the new Gmail 

 

RT @Seagalla designed the high-speed rail signaling system. 

 

And, my own contribution: 

 

RT : Made sure the cast of "Girls" consisted only of princelings. 

 

So... the hard-working staff here at Foreign Policy encourage you to contribute to the #BoXilaicrimes meme.  Think of the most annoying things you have  had to process recently -- and then blame them on Bo!  It's easy and fun.

Posted By Daniel W. Drezner

Let's face it, far more Americans associate the name "Bo" more with Barack Obama's dog than with Bo Xilai, the now-disgraced former Communist Party chief of Chongqing (my generation of Americans will, of course, forever associate Bo with this).  That might be about to change, however, because Bo is at the center of the most serious post-Tiananmen political scandal in China.  

To recap:  Bo was pushing hard for an appointment to the nine-person Standing Committee of the Chinese Communist Party's (CCP) Politburo -- the most powerful decision-making body in China.  He might very well have received it too, based on the combination of his "princeling" ties, his populist, Maoist-style campaigns and the flock of high party officials visiting Chongqing to see how he was doing it. 

Two months ago,  however, Bo's police chief Wang Lijun showed up at the U.S. consulate in Chengdu seeking asylum.  He left the consulate, but the reverberations haven't stopped.  First Bo disappeared from public view, then his "Jackie Kennedyesque" wife Gu Kailai was charged with the murder of British citizen Neil Haywood, and then Bo was formally put under investigation and stripped of all his party posts. 

So, what the hell happened?  Slowly, details are starting to trickle out about Bo's methods in Chongqing and exactly what led to his downfall.  In order, I'd suggest reading the following: 

1)  On Bo's methods in Chingqing, see this gripping Financial Times expose from March, followed by Malcolm Moore's dispatch in the Daily Telegraph

2)  See Reuters' Chris Buckley on what exactly triggered Wang's flight to Chengdu -- and then read this Cheng Li interview in NBR that throws some cold water on the stories coming out now.  . 

3)  On how U.S. officials handled Wang's request for asylum, check out the New York Times' Steven Lee Myers and Mark Landler's excellent reconstruction of events in Chengdu

4)  On what This All Means for China, read Minxin Pei, Max Fisher, Cheng Li, and Jonathan Fenby

5)  Finally, read John Garnault's excellent FP Long Read on whether a Bo-style scandal is about to break out in the People's Liberation Army. 

OK, now you know everything I know.  So what do I know about Bo?  Not much, except for four things: 

A)  For the past decade there was a lot of talk about how China had managed to routinize the authoritarian selection process.  The transfer of power from Jiang Zemin to Hu Jintao seemed seamless.  Well, say what you will about what's happening now, but it ain't seamless.

B)  I tend to agree with Minxin Pei (and disagree with Cheng Li) that Bo's arrest is not an example of the system working, but rather the system coming veeeerrrrry close to a catastrophic failure.  The fact China's official apparatus has clammed up after Bo's arrest is a clear sign that there's still a lot of infighting going on.  The notion that this will therefore lead to a real reform/anti-corruption trend strikes me as based on hope more than reality (though see this previous post of mine as a hedge). 

C)  Despite the official no-comments, the fact that Chinese officials are now leaking like a seive to Western reporters is interesting, and suggests the ways in which a purge in this decade will not resemble pre-Tiananmen purges.  It's not that there will be more rumors and conspiracy theories now than thirty years ago -- it's that all this stuff will not be on the Internet -- which will force the CCP to respond more than it would like.

D)  Based on how things played out, the U.S. State Department deserves a tip of the cap for how it handled Wang's sojourn to Chengdu.  The fact that there were no press leaks until yesterday is good -- anything the U.S. government says publicly about this episode needlessly embarrasses and angers the Chinese government.  That said, given the current attitudes in Beijing about the United States, even the Times story is going to raise some hackles.  Indeed, given the current strife inside China, it would be easy to envision Beijing making life difficult for the United States elsewhere as a way of using nationalism to paper over elite divisions.

Am I missing anthing?  Oh, I'm missing plenty, and I strongly urge China-watchers to proffer their comments! 

Posted By Daniel W. Drezner

The AP breathlessly reports that Punxatawney Phil saw his shadow today, which means another six weeks of winter.  Based on recent data, I'm wondering if Syria's Bashar al-Assad can say the same thing. 

Earlier this week the U.S. intelligence heads testified on Syria, and offered some surprising assessments:

Syrian President Bashar al Assad will not be able to maintain his grip on power in the wake of a wave of opposition that has dragged on for almost a year, America’s top intelligence officials told Congress today.

“I personally believe it’s a question of time before Assad falls,” James Clapper, director of National Intelligence, told the Senate Permanent Select Committee on Intelligence.  CIA Director David Petraeus added, “I generally subscribe to that as well.”

Clapper said “it could be a long time” before the Assad regime falls because of “the protraction of these demonstrations” and a Syrian opposition that remains fragmented.  Despite that, Clapper said “I do not see how long he can sustain his rule of Syria.”

Hey, remember how, a year ago, Clapper got into trouble for being honest about the state of affairs in Libya despite his honesty being a political inconvenience?  This is precisely why I find his testimony so credible. 

Recent facts on the ground buttress Clapper's assessment -- as does the Financial Times' David Gardner's reportage, which is chock-full of interesting facts about the Assad regime's constrained ability to repress:

The [Assad] regime believed it could crush the uprising, which began in mid-March after revolutions in Tunisia and Egypt, by the end of April and then in the summer Ramadan Offensive. It failed.

These operations revealed its reliance on two dependable units -- the 4th Armoured Division and the Republican Guard, made up of Alawites, the heterodox Shia minority that forms the backbone of the regime, and commanded by Mr Assad’s volatile younger brother, Maher. Whenever the Assads deployed units with a rank-and-file reflecting Syria’s 70 per cent Sunni majority -- as they had to if their offensives were to cover more than the hot spots of the moment -- defections ensued.

Even more interesting is Gardner's take on the evolving Russian position:

Russian diplomats…despite their rhetoric, have been talking to Syrian opposition figures and, according to the latter, carefully considering the Arab League proposals. As a veteran U.S. diplomat puts it, “there is a squishiness to where they [the Russians] are now”.

Russia does have a commercial interest in Syria, and arms the regime but the value of this depends on whether it will get paid, by a government running out of cash. It is only six years since Moscow had to write off more than $10bn in unpaid Syrian debts from the Soviet era.

Its real interest is in retaining its base facilities at the port of Tartus, its last naval asset in the Mediterranean. For that it will eventually need to reach an understanding with Syria’s future, not hold on to its past. Tartus is a long-term strategic asset. The Assads are no longer a long-term proposition.

This is new and interesting information, and does appear to track multiple reports that the negotiations in Turtle Bay will lead to an actual Security Council resolution on Syria. If Russia cuts a deal with the opposition and removes its veto from multilateral action, how long can Assad hold out? 

What do you think? Will Assad be out of power in Syria inside of six weeks or not?

Developing…

Posted By Daniel W. Drezner

One of the drawbacks of being a foreign policy blogger is that it becomes very awkward to avoid discussing international relations events that make the front page for consecutive days.  I am therefore duty-bound to comment on Kim Jong Il's death, Kim Jong Un's ascension to leadership, and what it means for North Korea. 

Except I have no friggin' clue what will happen. 

I am in good company on this total lack of knowledge.  I'm bemused by all the U.S. officials anonymously commenting on what Kim Jong Un is like, given that our intelligence on this country is so awesome that Washington didn't know his father was dead until 50 hours after he died, and then only because the North Koreans announced it on television.  To be fair, however, it's not like the South Koreans knew either, and some reports I've seen suggest the Chinese were in the dark as well. 

Despite the near total lack of information outside of North Korea about North Korea, the International Brotherhood of Foreign Policy Pundits require I provide at least two predictions per post.  So, here's my first prediction, courtesy of Mr. T

What we do know about the triumvirate of Kim-Jong-Il selected leaders guiding Kim Jong Un into power does not bode well for the North Korean economy.  The only bright spot for the DPRK's economy in recent years was a modest step towards private economic activity.  The fact that one of them "published articles about the need for the government to curtail market-oriented activity" does not bode well for the per capita income of your average North Korean. 

My second prediction is that Kim Jong Un will hold power for longer than any Western analyst expects him to hold power.  Most of the pundit chatter has been about the Kim the Youngest's lack of gravitas and the asbsence of sufficient time to groom him as the successor to Kim Jong Il.  As I'm hearing this, I keep thinking of Hua Guofeng, Mao's successor.  It's an imperfect analogy, but Hua was a relative unknown plucked from obscurity by Mao only a few years before his death.  In the end he was outmaneuvered by Deng Xiaoping and his allies, but even Hua managed to stay in power for a few years before that happened, putting down an attempted coup by Mao's wife Jiang Qing and the Gang of Four. 

To use more game-theoretic language, I'm not sure there is a first-mover advantage to any ambitious North Korean challenging Kim the Youngest.  Because of that, and because the entire DPRK elite likely fears internal division when concerned about natiional survival, the tyranny of the status quo will likely persist for longer than anyone realizes.  Which, unfortunately, in this case, happens to be actual tyranny. 

Am I missing anything? 

Posted By Daniel W. Drezner

Travel and the associated jet lag from the travel have left me a bit befuddled and confused about the foreign policy discourse of the last week. I keep having to re-watch or re-read things just to make sure I'm understanding them correctly. I mean, did Rick Perry actually give the answer he gave on the Pakistani nukes question? Did John Mearsheimer seriously claim that a self-hating Jew can provide an accurate analysis about the state of modern Judaism?

My biggest confusion, however, is over the announced Putin-Medvedev switcheroo over the weekend. Indeed, my confusion operates at many levels. First, I was flummoxed that, well, any Russia-watcher was surprised by this move. Second, I was at a loss as to explain why any Washington-watcher would be fretting about the effect of this move on the "reset" of Russian-American relations. As Walter Russell Mead correctly observed today, "There is a good case for a businesslike US-Russian relationship no matter who runs Russia."

What has really confused me, however, is the possibility that this planned transition might hit a few bumps in the road.... like the actual departure of a powerful cabinet official:

Dmitry Medvedev, Russian president, sacked the country's finance minister on Monday, in the clearest sign yet that a deal between Mr Medvedev and prime minister Vladimir Putin to swap jobs next year is provoking a furious backlash in Moscow political circles.

Alexei Kudrin, the finance minister, had said at the weekend he would refuse to serve under Mr Medvedev if he became prime minister next year. In dismissing the mutinous minister, Mr Medvedev sought to demonstrate that he still has authority, analysts said - despite the humiliation of voluntarily standing down as president in favour of Mr Putin.

Mr Kudrin, a fiscal conservative, is respected by investors and widely credited with seeing Russia through the 2008-09 financial crisis. His dismissal came after Russian financial markets closed but the rouble earlier lost more than 1 per cent against the dollar, partly due to apprehension about the conflict with Mr Medvedev....

At a meeting of a government commission in the town of Dmitrovgrad on Monday, the two men faced off when Mr Medvedev told Mr Kudrin that his statement on Saturday "appears improper ... and can in no way be justified. Nobody has revoked discipline and subordination."

"If, Alexei Leonidovich, you disagree with the course of the president, there is only one course of action and you know it: to resign."

Mr Kudrin responded with a jibe: "I will take a decision only after having consulted the prime minister."

"You can get advice from whoever you want, with the prime minister if you want," snapped back Mr Medvedev. "But as long as I am president, these decisions I will take myself."

A few hours later Mr Medvdev's spokesperson announced Mr Kudrin's departure for reasons "that were laid out clearly in the commission meeting".

The humiliating public swipe from Mr Kudrin is a measure of how far Mr Medvedev's authority has eroded since he announced at the annual congress of the ruling United Russia party on Saturday that he would stand down next year to make way for a return of Mr Putin for a third term as president, assuming the role of prime minister under Mr Putin.

Could this kind of elite discord lead to even greater political discord in Russia? Reading Joshua Tucker's collection of expert commentary, as well as Julia Ioffe's FP observations, my initial answer would be no. Kudrin quit because he wanted to be the next prime minister and was therefore the odd man out of the Putin-Medvedev exchange. That would not seem to be a great foundation for a mass backlash against this move.

On the other hand.... in the case of Russia, mass backlash might be less important than elite backlash, and Kudrin is hardly the only member of the elite to be on the outside of the Putin-Medvedev axis. The self-interested reasons for the backlash matter less than the very public signal that the leadership transition is not playing out so smoothly after all.

In the short term, the most likely outcome is that this contretemps will blow over, and the worst-case scenario for Putin is that he decides to ditch Medvedev for someone a Kudrin clone/deputy. In the longer term, however, I do wonder if this move will push the Russian regime towards greater instability.

So, as I said, I'm pretty confused right now. What do you think?

Posted By Daniel W. Drezner

The Wall Street Journal, New York Times, and Reuters have stories about Germany's newly announced plan to denuclearize by 2022.  See if you can find the common pattern.  Here's the WSJ: 

Germany's move—marking a contrast with the U.S. and other countries that have largely stuck to plans to continue pursuing nuclear power—is a U-turn from a contentious plan that Ms. Merkel engineered just last fall that would have extended the lifetimes of some of Germany's reactors into the 2030s, more than a decade longer than previously scheduled. Ms. Merkel's latest move is effectively a return to an agreement to phase out nuclear power approved in 2002 by a center-left Social Democrat-Green coalition....

In few countries is nuclear energy the hot-button issue it is in Germany, where polls show some 70% of the populace opposes it, the legacy of a broad-based antinuclear movement that harks back to the 1986 Chernobyl accident. Since the Fukushima accident, antinuclear protests have taken place across the country.

Ms. Merkel's change in course, though, hasn't produced the desired political effect. Conservative allies have been frustrated by her turn away from a cherished policy victory, and nuclear opponents have seen the move as opportunistic. Those perceptions contributed to several stinging regional election losses for the Christian Democratic Union this spring, and have led to a surge in clout for the opposition Green Party.

And now the NYT:

For Mrs. Merkel, the embrace of clean energy represents a transformation based on the politics of the ballot box. Just last year, her center-right coalition forced through an unpopular plan to extend the life of nuclear power plants, with the last to close in 2036. That action inflamed public opinion but the Fukushima disaster politicized it. The nuclear crisis is widely believed to have caused Mrs. Merkel’s party to lose control of the German state of Baden-Württemberg for the first time in 58 years, in a March election that became a referendum on energy policy.

By Monday, Mrs. Merkel said the country must “not let go the chance” to end its dependence on nuclear power.

And, finally, Reuters: 

The German chancellor has, in nine months, gone from touting nuclear plants as a safe "bridge" to renewable energy and extending their lifespan to pushing a nuclear exit strategy that rivals the ambitions of the Social Democrats and Greens.

Merkel had her atomic epiphany after the Fukushima disaster in Japan in March, announcing a moratorium on nuclear power and launching an urgent overhaul of German energy policy, resulting in the exit strategy announced on Monday.

Her change of heart, however genuine as it may be, coincides with a string of disastrous election results for her Christian Democrats (CDU) and their Free Democrat (FDP) allies that have been partly blamed on her unpopular pro-nuclear policy so far.

With the FDP losing popularity almost as fast as the Greens gain it, and the Greens unseating the CDU in their heartland of Baden-Wuerttemberg in March as well as outpolling them for the first time in Germany in Bremen this month, Merkel has upgraded the nuclear moratorium to a rush for the exit.

Watching Merkel's performance during the myriad euro crises of the past two years, I'm beginning o detect a decision-making algorithm at work.  Let's call it The Merkel Algorithm.  It consists of the following steps:

1)  A problem festers;

2)  Dither and do nothing;

3)  Public opinion polls drop;

4)  Let things fester some more;

5)  Lose an electioon somewhere;

6)  Announce new policy that reverses prior position

7)  Lose even more political support. 

Merkel appears to have brilliantly executed this strategy on both the eurozone and nuclear power.  In all seriousness, what I don't understand is the long periods of dithering and festering.  I get that politicians will sometimes be wrong-footed on policy shocks.  Merkel, however, really does seem to wait until the worst, most cravenly political moment to do something.  Why? 

Your humble blogger hereby calls on all Germany-watchers to offer either an explanation or a more nuanced take on the Merkel Algorithm -- because your humble blogger is good and truly flummoxed. 

Posted By Daniel W. Drezner

In the wake of Hosni Mubarak's departure, there is going to be rampant speculation on whether another Arab domino will fall.  At a minimum, the fall of Mubarak has emboldened activists in neighboring countries

As fun as it is to speculate about whether and how this kind of deemocratic virus will spread.  It is worth stepping back and appreciating that the region doesn't look quite the same.  Every few years or so since the third wave of deocraization, some article would try to scrape together the meager progress towards representative democracy in the Middle East and claim it was a wave.  Inevitably the nascent trends would dissipate. 

That could still happen, but it seems harder this time around.  Looking at the Middle East now, there are established democracies in Turkey and Israel, some semblance of representative government in Lebanon and Iraq, and transitioning governments in Tunisia and Egypt.  The likelihood of all of these governments reverting to strongman authoritarianism or becoming new Islamic theocracies seems highly unlikely.  Already governments like Yemen, Jordan and the Palestinian authority are making concessions to get out front of new large-scale protests.

This is, to quote Vice President Biden, "a big f**king deal."  It's particularly big because this happened during a period of high oil prices, which ostensibly was a good thing for Arab autocrats. 

The one thing that nags at me is whether there is a government willing to shoot its own citizens, and whether such action would halt the actual wave spreading across the Middle East. 

What do you think? 

Posted By Daniel W. Drezner

Comment away on what's going to happen in Egypt after Hosni Mubarak's resignation third unsatisfying speech. 

Ironically, I think if Mubarak had said what he just said on the night of his first speech, things would be far more stable.  As it currently stands, however, it's painful to hear Hosni Mubarak referring to himself in the third person trying to give up as little as possible, even as his various power bases erode and more social strata join in the opposition

I think Mubarak agreed to transfer some powers to his Vice President, and he promised some constitutional chanes.  To be honest, however, that wasn't the primary theme of the speech, and I don't think this is remote close to ending the crisis. 

Developing....

Posted By Daniel W. Drezner

Longtime readers might have noted that I've been super-silent about events in Tunisia, Egypt, Lebanon, etc. As one reader asked me, "What gives?"

The answer is that, way back in the early days of... er... this month, I was all set to blog a response to Marc Lynch's speculation that authoritarian Arab governments were in trouble. "Silly Marc!" I thought, "this kind of speculation happens every five years or so, and it always turns out that these regimes are more robust than anyone thought."

In an unusual display of sloth caution on my part, however, I held back out of prudence. I hadn't thought all that much about the situation on the ground, and that's a time when silence is the best policy. In contrast, Steve Walt stepped into the breach... and now he's trying to find his way back to shore.

Marc's latest post strikes me as both informative and spot-on in his assessments, so to avoid redundancy, I'd suggest checking it out.

For my readers, I'll just leave this as an open comment thread with the following discussion questions:

1) How much logic will be contorted in an effort to argue that the 2003 invasion of Iraq was the trigger? I'm thinking a lot.

2) Which neoconservative impulse will win out -- the embrace of democratic longing, or the fear of Islamic movements taking power?

3) A year from now, will Tunisia actually be a democracy? The "Jasmine Revolution" portion of this story is easy -- it's the grubby parts of institution-building and power-sharing that muck things up.

Developing....

Posted By Daniel W. Drezner

Your humble blogger has, in the past, live-blogged or live-tweeted the State of the Union address. After reading the National Journal's draft of the speech, I've decided that the mindless applause will convert a decent 30-minute speech into an interminable 75-minute talkathonso I'm gonna watch Mystery Men instead to pass.

Looking over the draft, however, I see that the Obama administration has really taken this competitiveness theme to heart. More than any State of the Union I've seen before, President Obama raises the examples of other countries doing things better than the United States as an impetus for the U.S. to do more. Consider:

The rules have changed. In a single generation, revolutions in technology have transformed the way we live, work and do business. Steel mills that once needed 1,000 workers can now do the same work with 100. Today, just about any company can set up shop, hire workers, and sell their products wherever there's an internet connection.

Meanwhile, nations like China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with greater emphasis on math and science. They're investing in research and new technologies. Just recently, China became home to the world's largest private solar research facility, and the world's fastest computer....

Half a century ago, when the Soviets beat us into space with the launch of a satellite called Sputnik¸ we had no idea how we'd beat them to the moon. The science wasn't there yet. NASA didn't even exist. But after investing in better research and education, we didn't just surpass the Soviets; we unleashed a wave of innovation that created new industries and millions of new jobs.

This is our generation's Sputnik moment....

The quality of our math and science education lags behind many other nations. America has fallen to 9th in the proportion of young people with a college degree. And so the question is whether all of us - as citizens, and as parents - are willing to do what's necessary to give every child a chance to succeed....

Our infrastructure used to be the best - but our lead has slipped. South Korean homes now have greater internet access than we do. Countries in Europe and Russia invest more in their roads and railways than we do. China is building faster trains and newer airports. Meanwhile, when our own engineers graded our nation's infrastructure, they gave us a "D."

We have to do better.

I'm curious to see how this will play out. On the one hand, the administration is obviously using this kind of "we're falling behind other countries!" shtick as a way to build public support for investments in education and infrastructure. In the same speech he talks about falling behind South Korea, for example, he embraces the Korea-U.S. Free Trade Agreement.

At the same time, I have two big concerns with this approach. First, there's the risk of rhetorical blowback, in which everyone freaks out and reacts in a hysterical manner.

Second, and more important, the percentage of the speech devoted to microeconomic "competitiveness" issues vastly exceeds the amount devoted to long-term macroeconomic policy. If the federal government really wants to create a better climate for innovation, it needs to send a credible signal that steps are being taken to deal with long-term budgetary problems. That section of the speech was, er, less solid.

[What about the foreign policy sections?!--ed. Meh. Nothing bad -- just nothing of substance either. One could argue that the biggest foreign policy innovation of the SOTU is the administration's decision to use globalization as the political crowbar to pry infrastructure spending investments from Congress.]

Feel free to comment away on what you would like to see in the speech.

Posted By Daniel W. Drezner

I see that The Powers That Be at FP are highlighting my foolhardy unconventional wisdom about China's rise on their splash page.

Given the Hu-Obama summit and subsequent flurry of China commentary this week, it's worth highlighting the most absurd data point I cited in that article -- Forbes' magazine's decision to name Chinese President Hu Jintao the world's most powerful individual. Their explanation:

Paramount political leader of more people than anyone else on the planet; exercises near dictatorial control over 1.3 billion people, one-fifth of world's population. Unlike Western counterparts, Hu can divert rivers, build cities, jail dissidents and censor Internet without meddling from pesky bureaucrats, courts.

With these two sentences, the editors at Forbes managed to demonstrate an even shallower analysis of domestic politics than their Dinesh D'Souza cover story on Obama, which I didn't think was possible.

Let's review just a smattering of coverage about Hu Jintao's current ability to exercise iron-willed control over the Chinese bureaucracy, shall we? First, Gordon Chang in The New Republic:

Hu is sometimes called the world's most powerful person -- Forbes magazine gave him that accolade in November -- but he is a weak leader back home. Just how weak was revealed in two startling incidents within the past three weeks. On Tuesday, after the state-run Chengdu Aircraft Design and Research Institute performed the first flight test of the J-20 stealth fighter -- an unmistakable slap in the face of Defense Secretary Robert Gates, who was visiting Beijing at the time -- Hu professed not to know that the test had occurred....

If the Chinese leader was telling the truth, the test flight reveals a remarkable defiance of civilian authority by the flag officers of the People's Liberation Army, an obvious attempt to undermine the military cooperation Hu said he wanted to foster. Or if, as is more likely, Hu did in fact know about the timing of the test, he nonetheless said something that made himself appear inept. One has to wonder about a political system that creates incentives for its top leader to publicly imply that he is both ignorant and weak.

Either way, the unmistakable impression is that Hu seems to have much less influence than is often assumed. This could be due to the fact that China is in the middle of a transition to the next generation of political leaders -- led by Xi Jinping -- who are gaining in power as Hu loses his in the long run up to the actual handover.

Next, the Economist:

China's new raw-knuckle diplomacy is partly the consequence of a rowdy debate raging inside China about how the country should exercise its new-found power. The liberal, internationalist wing of the establishment, always small, has been drowned out by a nativist movement, fanned by the internet, which mistrusts an American-led international order.

Then there's Drew Thompson in -- hey, it's FP!!

China's national security decision-making process is opaque, and so this worrisome disconnect -- who knew what when -- is difficult to ascertain with certainty. It is highly improbable that Hu was unaware of the development of this major military advancement. His role as chairman of the Central Military Commission ensures that he is well briefed about major programs, and he doubtlessly approves their large budgets. What is not known is how much oversight and control the central government leadership in Beijing had over the PLA's decision-making process that lead to highly visible tests at the Chengdu air base just as Gates was visiting China.

And, finally, David Sanger and Michael Wines in the New York Times:

China is far wealthier and more influential, but Mr. Hu also may be the weakest leader of the Communist era. He is less able to project authority than his predecessors were -- and perhaps less able to keep relations between the world's two largest economies from becoming more adversarial.

Mr. Hu's strange encounter with Defense Secretary Robert M. Gates here last week -- in which he was apparently unaware that his own air force had just test-flown China's first stealth fighter -- was only the latest case suggesting that he has been boxed in or circumvented by rival power centers....

President Obama's top advisers have concluded that Mr. Hu is often at the mercy of a diffuse ruling party in which generals, ministers and big corporate interests have more clout, and less deference, than they did in the days of Mao or Deng Xiaoping, who commanded basically unquestioned authority....

"There is a remarkable amount of chaos in the system, more than you ever saw dealing with the Chinese 20 years ago," Brent Scowcroft, the former national security adviser and Mr. Gates's mentor, said Saturday. "The military doesn't participate in the system the way it once did. They are more autonomous -- and so are a lot of others."

Now, to be fair, it's possible that China is learning how to play the authoritarian equivalent of the two-level game. Even if that's true, however, China is playing that game very badly -- and they're playing it in policy arenas that are guaranteed to trigger a balancing coalition rather than accommodation.

There are a lot of other areas where your replacement-level American commentator is vastly exaggerating China's power. But Forbes' editors easily win the... the....

OK, contest for readers -- name the award that I want to give to writers who vastly exaggerate China's rise!

Posted By Daniel W. Drezner

I was very curious to come to Dubai. I kept hearing people describe it and then stumble on a lack of proper adjectives. In 2008 I wrote about how it was an exemplar entrepôt economy that others in the region would copy in order to diversify away from oil. The financial crisis burst the property bubble, however, and Dubai had to turn to much wealthier Abu Dhabi for a sovereign bailout and rename the Burj Dubai to the Burj Khalifa. Since then, the big picture has improved somewhat. What about the picture on the ground, however? Is Dubai still a model for the rest of the Gulf?

First, the picture on the ground. Ever since I arrived, I've been trying to figure out the best way to explain Dubai. Here's what I've come up with: If Stanley Kubrick had an unlimited budget and was making a movie about Las Vegas glitz, Dubai would be his set.

What do I mean by this? Well, like Kubrick's films, Dubai is underpopulated in an odd way, and the lack of people gives the place a very odd feel. There are shiny hi-tech malls, stores, and skyscrapers galore, but there isn't much else. From a citywide perspective, looking from the top of the Burj Khalifa, one sees all the new skyscrapers, a few blocks of the old part of town, and then … desert.

Even in the shiny parts of the city, there just aren't enough people to fill up the space. Everywhere I looked, there were way too many workers per customer. The Dubai Mall, for example, is truly massive, with every Western brand name that still exists and a few (Rainforest Cafe, Benetton) that I thought had gone under. There was an entire wing of racy lingerie stores. The mall wasn't empty by any stretch of the imagination, but neither was it really all that full. I don't honestly know if there's sufficient demand to keep these stores afloat, however.

Lest one think this is criticism, it isn't. I'm rooting for Dubai to succeed. If enough people come to the place, I think the Kubrickian oddness will wear off (though, not, perhaps, in the Armani Hotel. The hotel literature informs me that "every detail has been personally chosen by Armani to reflect his passion for stylish comfort and functionality." To your humble blogger, it seems like Mr. Armani has expended considerable sums of money to bring back the tacky wood finish of late 70s American suburbia, combined with the creeping isolation of Kubrick's The Shining). Any country that embraces the service sector with the same vengeance of North America is fine by me.

Can Dubai be replicated? Here I'm more skeptical than in 2008. I suspect Dubai will survive and thrive. Every region needs a world-class airport and service-sector hub, and Dubai has become that hub for this region. I'm not sure the market here is big enough to support similar hubs in Qatar, Abu Dhabi, Bahrain, and Kuwait, however.

I'd be very curious to hear what other Dubai visitors and residents think in the comments.

Posted By Daniel W. Drezner

Your humble blogger has been off the grid the past few days because he was north of the Guatemalan border south of the Rio Grande the past few days as a (very happy) guest of the Mexican Foreign Ministry's Matias Romero Institute.  I was there to talk about economic powers and the G-20. 

A few random world politics and travel notes:

1)  Let me add Mexico to the list of Civilized Countries Not Stupid Enough to Force Travelers to Remove Footwear Going Through Security.  Hear that, TSA???!!!!  This list is getting really friggin' long, and I don't see the United States anywhere on it!!!! 

Sorry, I had to get that out of my system.

2)  I'm a reasonably well-read guy, and tend to hang around with people who claim to be up on world politics.  When I told these people that I was going to Mexico City, many gave me the long look and said something to the effect of "be very careful."  Now, I understand that stories like this well lead to generalized concern about the entire country, but it really shouldn't.  True, there are certainly neighborhoods that one should avoid in Mexico's capital.  But this is also true of Washington, DC, and no one tells me to be careful going there. 

In other words, I think the fears about Mexico City might be exaggerated in the US press. 

3)  I have now been in a real Mexico City traffic jam.  I can safely say I don't want to be in another one. 

4)  Mexico will be hosting the G-20 leaders summit in 2012, which will be interesting timing, to say the least.  I had the good fortune to meet with some of the officials who will be managing the process, and I advised them to use the summit to announce their re-annexation of California let's just say there's some... uncertainty about how the G-20 will play out in the next few years. 

5)  It was pretty cool to discover that there are a robust number of zombie lovers in Mexzico.

More later when I catch up on the events of the day. 

Posted By Daniel W. Drezner

Hey, remember the rest of the world?

The Financial Times' Ben Hall and James Blitz  report on a surprising degree of defense cooperation between London and Paris:

David Cameron, British prime minister, and Nicolas Sarkozy, French president, hailed their summit in London on Tuesday as an unprecedented move towards closer integration between Europe's pre-eminent military powers brought on by budgetary austerity but also a closer alignment of the two countries' foreign policies.

They signed two treaties: one covering the sharing of technology used to maintain nuclear warheads and another on initiatives about conventional forces.

Mr. Sarkozy said the agreement to share a new research facility in France for the testing of nuclear warheads was testament to a "level of confidence between our two nations unequalled in history".

Until now, France and Britain have closely guarded the secrets of their nuclear deterrents, regarding them as the bedrock of their independence.

Mr Cameron said the two treaties would commit the French and British armed forces to working "more closely than ever before".

Paris and London also agreed to set up an "integrated carrier strike group", allowing each to fly combat aircraft from the other’s carrier once Britain has an operational ship equipped with its U.S.-built Joint Strike Fighter jets, by the beginning of the next decade. In the next 10 years, the French and British navies would centre co-operation on the Charles de Gaulle, France’s only carrier.

What's interesting about this is not the military effects -- in the end, this is about trying to do more with less -- but the political ones. In a world of austerity, there is some logic in close allies working together to eliminate redundant platforms and/or other fixed costs that could be pooled across countries. Furthermore, this kind of defense integration, once started, would strike me as very hard to reverse. 

This year has seen a lot of people predicting the end of the EU and NATO as Europe struggles with its economic misfortune. I wonder, however, if hard times are actually having the opposite effect of forcing European and NATO countries closer together. This might not be popular, but it's the only viable policy option in some instances.

Posted By Daniel W. Drezner

Today's Tom Friedman column on China's future is a pretty good one, in that it demonstrates how and why Friedman excels at a craft that flummoxes the best essayists. First, he asks a great question: 

[O]ne of the most intriguing political science questions in the world today is: Can China continue to prosper, while censoring the Internet, controlling its news media and insisting on a monopoly of political power by the Chinese Communist Party? 

Then, he makes a coherent argument in less than 800 words that the most populous nation in the world will have no choice but to liberalize and democratize. Friedman's thesis:

The “Beijing Consensus,” of economic liberty without political liberty, may have been a great strategy for takeoff, but it won’t get you to the next level....

My reason for believing China will have to open up sooner than its leadership thinks has to do with its basic challenge: It has to get rich before it gets old....

The only stable way to handle that is to raise incomes by moving more Chinese from low-wage manufacturing jobs to more knowledge- and services-based jobs, as Hong Kong did. But, and here’s the rub, today’s knowledge industries are all being built on social networks that enable open collaboration, the free sharing of ideas and the formation of productive relationships — both within companies and around the globe. The logic is that all of us are smarter than one of us, and the unique feature of today’s flat world is that you can actually tap the brains and skills of all of us, or at least more people in more places. Companies and countries that enable that will thrive more than those that don’t.

This argument is clear enough for the average New York Times reader to get it. It's also clear enough for us foreign policy bloggers in pajamas online analysts to point out where and how he's wrong. In particular, Friedman makes two large errors:

1) It's not clear that China has to get to "the next level" of economic development in order to become the most powerful country in the world. China's GDP could be larger than America's while still possessing only 1/3  the per capita income of the United States. If the rest of China were to enjoy the infrastructure and living standards or, say, Shenzhen, China would be doing quite well for itself. And as Chinese consumers demand more goods and services, the domestic jobs that power the rise of middle-class professionals -- teachers, lawyers, consultants , environmental engineers, travel agents, etc. -- will start to emerge in large numbers. 

Just to be clear here -- Friedman is right to say that greater liberty is likely to lead to more innovative growth. My point is that a population of a billion plus people allows the government to focus on intensive growth for an awfully long time and still prosper an amazing amount. 

2) In a world of network technologies and externalities, the best and most innovative technology does not always win -- the technology used by the most customers develops the lock-in. China doesn't have to have a technological edge, it just has to ensure that the largest market in the world embraces China-friendly technologies. Hey, come to think of it, you know what institution could ensure that occurrence? The Chinese Communist Party.

[Still, you hope Friedman is right and you're wrong.... right? --ed. Well, in theory yes, but...... after reading this SPIRI paper on China's new foreign policy actors, I'm not so sure. The common thread in that paper is that the more pluralist actors were also the most nationalist. It's entirely possible that a freer China is also a more reckless China.]

Posted By Daniel W. Drezner

One of my favorite passages of fiction comes from Douglas Adams' The Restaurant at the End of the Universe: 

It is a curious fact, and one to which no one knows quite how much importance to attach, that something like 85% of all known worlds in the Galaxy, be they primitive or highly advanced, have invented a drink called jynnan tonnyx, or gee-N'N-T'N-ix, or jinond-o-nicks, or any one of a thousand or more variations on the same phonetic theme. The drinks themselves are not the same, and vary between the Sivolvian 'chinanto/mnigs' which is ordinary water served at slightly above room temperature, and the Gagrakackan 'tzjin-anthony-ks' which kill cows at a hundred paces; and in fact the one common factor between all of them, beyond the fact that the names sound the same, is that they were all invented and named before the worlds concerned made contact with any other worlds.

What can be made of this fact? It exists in total isolation. As far as any theory of structural linguistics is concerned it is right off the graph, and yet it persists. Old structural linguists get very angry when young structural linguists go on about it. Young structural linguists get deeply excited about it and stay up late at night convinced that they are very close to something of profound importance, and end up becoming old structural linguists before their time, getting very angry with the young ones. Structural linguistics is a bitterly divided and unhappy discipline, and a large number of its practitioners spend too many nights drowning their problems in Ouisghian Zodahs.

As someone in transition from being a young structural IR theorist to an old one, I've now seen enough to recognize when certain patterns begin to recur. For example, I've now read enough articles about the North Korea's Worker Party Congress to know the following:

1) This was a Very Big Deal

2) Kim Jong Il's family got some promotions

3) It is impossible to write an article about North Korea without quoting either Andrei Lankov or Victor Cha.

And after reading all of this, I can now state with confidence the following: no one knows exactly what the f*** is going to happen in North Korea once Kim Jong Il dies. There are plausible stories that can be spun any which way. But no one really knows.

I hereby encourage all young political scientists to get excited about this Party Congress and convince me that something very important and of profound significance was revealed in the past 48 hours. 

Posted By Daniel W. Drezner

A few days ago my group went to Ramallah to meet with some leading figures in Fatah and the Palestinian Authority - including Prime Minister Salam Fayyad.  Here are my impressions from that seven-hour visit: 

1)  As much as the Israeli economy is booming, Ramallah is in the middle of the mother of all construction booms.  Practically every block has a crane with construction going on - and not an empt6y crane either, but one with actual work going on.  While the city is poorer than a comparable Israeli village, I should note that an awful lot of those new buildings look like the Palestinian version of McMansions. 

2)  For all the talk about Fatah being a secular movement, most of the people we saw outside of the Palestinian Authority (PA) buildings looked a bit more religious.  Except for those women working for the PA, every woman I saw on the street was wearing the hijab

3)  The one Palestinian all of our Israeli interlocutors praised was Fayyad, so it was quite interesting to meet him.  He's not a Fatah member, and has all the charisma of an economist.  That said, he has one thing that few people on either side possessed - a healthy dollop of optimism.  Fayyad has been hard at work trying to build the Palestinian state from the ground up, focusing on both the mundane (garbage collection) and the not-so-mundane (security).  The general consensus is that the West Bank is far safer and far better run than it was five years ago.  Fayyad's goal seems to be to get the Israelis to realize that the Palestinians are competent at statebuilding.  So far, the Israelis appear to concede that progress has been made.  That said, both the PA and the Israelis fear a reversal if further progress is not made during the peace talks. 

4)  There is a wide disagreement between the Israelis and the Palestinians about the explanation behind the disappearance of terrorist attacks emanating from the West Bank - and, more generally, the lack of violence during Operation Cast Lead or even the recent flotilla incident.  The Israelis credit Operation Defensive Shield, the security barrier, and the Israeli Defense Forces (a joke repeated by many Israelis we met was that Abu Mazen has the best security force in the word - the IDF).  PA officials credited improved Palestinian security forces and the conscious self-restraint of the Palestinian people.  One PA official claimed - and an former Israeli official confirmed - that 25,000 Palestinians cross the barrier undetected for economic reasons, and should the PA want to cause trouble, the barrier would be only a minor impediment.  This official later claimed that the PA could launch missiles onto Tel Aviv if they so decided. 

5)  There is also a wide divergence of preferences about the status quo.  As noted previously, the Israelis are pretty happy.  Fatah is less happy - they feel like they're doing the dirty work to enhance Israeli security without realizing any benefits in terms of peace negotiations.  They worry that unless progress is made on final status negotiation soon, they will lose power to Hamas.  I have every confidence that fair-minded FP readers can evaluate these claims. 

6)    About the border crossing and the security barrier.  Getting into Ramallah was pretty easy - the Israelis don't care who goes through, and the PA had no checkpoints.  Once inside, it's impossible to look at the concrete barrier and not think of the Berlin Wall.  Same concrete, same distribution of graffiti (no graffiti on the Israeli side, plenty on the Palestinian) and similar message content (though an awful lot of it was in English, which I found convenient ).  Getting back into Israel was much more onerous.  The lines were long, and the wait was interminable.  The Palestinians were pretty unfazed by the wait - for them, this was standard operating procedure.  On the other hand, Dalia Rabin, the head of the Rabin Institute and daughter of the late prime minister, had to be detained because she couldn't walk through the metal detector for health reasons. 

7)  I have something very controversial to say, so let's just get this out in the open:  the hummus at the Mirador Hotel in Ramallah is better than the hummus at the King David in Jerusalem  [Way to inflame tensions!!-ed.  I call them as I see them.]

UPDATE:  Yes, I meant seven thoughts, not six.  My counting skills are the first thing to go when I'm jet-lagged. 

Posted By Daniel W. Drezner

Halfway through my Israel vist, I've heard from a lot of high-ranking officials, strategists and academics about how they see Israel's security situation.  It would be safe to say that there are a few paradoxes. 

On the one hand, there are ways in which Israel's security situation has been better over the past 18 months than it has been for a long time. The rocket attack in Ashkelon was striking because it was the first one since Operation Cast Lead.  Rocket fire from Gaza went from 20-30 a day to one every other week or so.  Hamas is running Gaza, but Israel has enough reconnaissance equipment overhead and along the border to, as one IDF soldier put it, "know enough to know the brand of olive oil they put on their hummus."

Similarly, in the north, there has been no rocket fire since the 2006 Lebanon war. As for the West Bank, suicide terrorism has disappeared from Israel proper, and the Israelis sound confident that terrorist  networks are pretty much nonexistent.  The Israeli officials believe that the Palestinian Authority under Salid Fayyam Salam Fayyad are slowly and steadily developing administrative competencies, which help to ease the likelihood of Hamas developing a foothold. 

Why are things so good right now?  The Israelis believe it's because Hezbollah and Hamas now control territory, which means that they can be deterred.  As one official put it, both Hezbollah and Hamas have transformed themselves from strong terrorist networks to weak armies.  Israel fought bitterly against these outcomes, but they're comfortable with the status quo. 

Actually, most Israelis are too comfortable with the status quo.  The bad news is that Israeli security experts also recognize that all of the long-term trends are working against them.  As military forces, both Hamas and Hezbollah are only getting stronger, with rockets that can hit further into Israel proper.  Iran is developing its nuclear capabilities and supporting Hamas and Hezbollah.  The demographics are such that, unless Israel lets go of the West Bank very soon, Jews will become a distinct minority.  The window for a viable two-state solution is closing fast. 

So, what should be done?  Israelis don't have a great answer to this question, beyond "let the status quo continue."  They think containment can work in Gaza, and that engagement can work in the West Bank.  The wishful thinking that regime change will solve Israel's problem runs strong and deep within Israeli security circles (coincidentally, this is the only issue on which Israelis sound more optimistic than their America counterparts).  Mostly, however, Israeli officials are concerned that the attractiveness of the status quo will lull the population into inaction.  At a time when Israel could exploit its temporary advantages into the best deal possible, there isn't a lot of forward progress on any of Israel's security issues.  And normal Israeli citizens just want to go to the beach - which creates a problem that I'll discuss in my next post.

Posted By Daniel W. Drezner

Earlier today, we were given a tour of the Green Line and the physical barrier that separates Isreal proper from the West Bank (note -- the Green Line and the location of the barrier are not the same thing, which is a source of furious and intractable debate some mild contestation among the interested parties.)

We were driven to an overlook that contrasted a small Israeli settlement with the Palestinian city of Qalqilya. The settlement looks like a leafy exurb in the middle of a lot of brown, dilapidated neighborhoods. In case you were wondering, the material incentive for settlement housing is that it's 40 percent cheaper than living in Tel Aviv, the climate is more temperate, and it's still close to the city.

Our tour guide was a former IDF brigadier general, and without getting into specifics let's just say that he knew an awful lot about the West Bank. He gave us a brief lecture explaining the humanitarian issues that arose with the creation of the barrier, the security gains that came from it, the economic disparity between the Palestinian cities and the settlements, and so forth.

As he was talking, a second tour group showed up and the other tour guide started talking, also in English. I sidled up to the edge of that group to listen. The second guide's spiel was rather different. He talked about the dangers of disengaging from the West Bank, because of the possibility of a takeover by either Hamas of Hezbollah. Instability in Iraq and Jordan were also mentioned as possibilities.

Now this was a curious statement, given that Hezbollah is Shiite and based in Lebanon -- they have a tacit alliance with Hamas, but would be unlikely to find hospitable ground in the West Bank under any contingency.

It turns out that this tour was run by -- wait for it -- AIPAC. The guide was shepherding a group of Hispanic politicians around the country.

Take from this what you will.

Posted By Daniel W. Drezner

One of the glib jokes I like to make is that one country in the world needs to maintain a communist, centrally-planned economic structure.  This would serve as a public service warning to future generations of policymakers.   Some of them would inevitably romanticize prior communist efforts as noble in their aspirations and unfairly maligned by the capitalist writers of history.  At that point, you get on a plane and fly them to the Last Remaining Communist Country in the World to show them just how bad real life can be. 

My nominee for this country was always North Korea.  China's economy doesn't really fit Stalinist dicta anymore; neither does Vietnam.  And keeping Cuba as a communist country is just a fabulous waste of culture and resources.  No, North Korea seemed to be the ideal museum of blinkered economic thinking. 

After reading Sharon LaFraniere's heartbreaking front-page story in the New York Times about North Korea today, however, such jokes ring a little hollow: 

North Koreans are used to struggle and heartbreak. But the Nov. 30 currency devaluation, apparently an attempt to prop up a foundering state-run economy, was for some the worst disaster since a famine that killed hundreds of thousands in the mid-1990s.

Interviews in the past month with eight North Koreans who recently left their country — a prison escapee, illegal traders, people in temporary exile to find work in China, the traveling wife of an official in the ruling Workers’ Party — paint a haunting portrait of desperation inside North Korea, a nation of 24 million people, and of growing resentment toward its erratic leader, Kim Jong-Il.

What seems missing — for now, at least — is social instability. Widespread hardship, popular anger over the currency revaluation and growing political uncertainty as Mr. Kim seeks to install his third son as his successor have not hardened into noticeable resistance against the government. At least two of those interviewed in China hewed to the official propaganda line that North Korea was a victim of die-hard enemies, its impoverishment a Western plot, its survival threatened by the United States, South Korea, and Japan.

South Korea’s charge that North Korea sank one of its warships, the Cheonan, in March was just part of the plot, the party official’s wife said.

“That’s why we have weapons to protect ourselves,” she said while visiting relatives in northern China — and earning spare cash as a waitress. “Our enemies are trying to hit us from all sides, and that’s why we lack electricity and good infrastructure. North Korea must keep its doors locked.”  (emphasis added)

The emphasized part is what gets me.  The party official's wife -- presumably, one of the DPRK's elite -- has to work as a waitress to earn extra income. 

None of this is news.  Marcus Noland wrote about this here at FP.com back in March.  For a more detailed analysis, see his Peterson Institute for International Economics' brief with Stephan Haggard.  The highlights from that brief: 

 

Respondents portray a judicial and penal system characterized by high rates of arbitrary detention and release. Horrific abuses are characteristic not only of the camps for political prisoners, but are found at all levels of the penal system. In the survey of more than 1,300 refugees conducted in China between August 2004 and September 2005, nearly 10 percent reported incarceration in political and correctional detention facilities. Among this group, 90 percent reported witnessing forced starvation, 60 percent deaths due to beating or torture, and 27 percent executions. These findings are broadly confirmed by a second survey of 300 refugees conducted in South Korea in November 2008, which also included more detailed questions about initial arrest and detention, the types of facilities in which respondents were held, and the conditions they witnessed while incarcerated.

The emerging portrait of the North Korean penal system suggests a vast machine that processes large numbers of people engaged in illicit activities for relatively short periods, but which exposes them to terrible abuses while incarcerated. This pattern serves to effectively intimidate; our surveys reveal an atomized society in which barriers to collective action are high and overt political opposition minimal. However, repression has not served to eliminate market-oriented activity, in part because of the continuing poor economic performance of the regime. Rather, our surveys suggest a changing political economy in which corrupt officials extract bribes from those in the market, exploiting their ability to limit entanglement with a brutal penal system.

 

There is another simple reason why a social revolution is unlikely to topple the North Korean regime -- starving people might lack the energy to do anything other than search for something to eat. 

Developing... in the most depressing manner possible. 

PETER PARKS/AFP/Getty Images

Posted By Daniel W. Drezner

Steve Walt is pessimistic about the future of the European Union: 

There are in theory two ways that the EU could go in response to these events. One possibility is that these recent failures will eventually prompt a further expansion of all-European institutions.  This view is the modern version of old-style functionalism: if Europe needs certain institutions to work properly, it will eventually create them. 

The second possibility-which I'd deem more likely -- is that we have in fact seen the high-water mark of the EU project.  Nationalism is still alive and well in Europe, the Cold War is over and there is thus less need for unity against an external threat, Germany is gradually shedding its post-World War II reticence, and the consequences of over-expansion and excessive ambition have been fully exposed. I'm not saying the Union is headed for the dust-heap of history or anything like that (no bureaucracy goes out of business that quickly, especially when there are thousands of pages of laws involved), but a significant consolidation of power in the near future seems most unlikely.

Given that the EU Union has been one of the more interesting political experiments in recent decades, this is going to be fascinating to watch. Time for IR theorists to place their bets?

It's really in vogue to predict the downfall of the European Union, and for good reason -- they have had a truly awful 2010.  Steve, like any good realist, predicts the stalling out of the European project.  And he may very well be right. 

There are two things that hold me back from making a similar prediction, however.  First, the EU has had significant policy reverses in the past -- and the institution has always responded with further economic and political integration.  If I had said, the day after Black Wednesday, that the EU would create a single currency in less than a decade, all my realist IR friends would have bared their teeth in an effort to simulate laughter laughed.  Similarly, the failure of the EU constitution last decade did not deter the EU from creating new offices designed to centralize foreign policy coordination.  These offices haven't really been put to good use yet -- but new leadership could change that. 

Second, I'm not sure the eurozone can go backwards -- the common currency might be locked in.  There are suggestions that Greece needs to exit the eurozone for a spell, but there's no mechanism and/or infrastructure to make that transition (let me add here that the functionalist argument would predict that there should be a few departurues from the euro, for reasons that Paul Krugman laid out last Friday).  Since Greek debt is denominated in euros, and since I doubt the French and Germans will allow that debt to be devalued because it will kill their financial institutions holding Greek debt, Athens has strong incentives to stay in the euro fold. 

When going backwards isn't an option, and muddling through is no longer viable, the only thing left to do is move further along the integration project. 

It's entirely possible politics will get in the way of this -- but my 51/49 prediction is that come 2020, the European Union will look more centralized than it does today.  

What do you think?   

THOMAS LOHNES/AFP/Getty Images

Posted By Daniel W. Drezner

Three Five quick thoughts on the Moscow subway bombing:

1)  Who gets the blame?  As Clifford Levy points out in the NYT, "Mr. Putin built his reputation in part on his success at suppressing terrorism, so the attacks could be considered a challenge to his stature."  On the other hand, one could see Putin trying to shift the blame onto Russian president Dmitri Medvedev or Moscow mayor Yuri Luzhkov as a way to thwart future rivals.  On the other hand, a lot of Russians are already unhappy with the government, and diversionary tactics might not work this time. 

2)  Is there an international dimension?  Russia's neighbors in the Caucasus and Central Asia, along with the United States and China, are praying right now that the suicide bombers were entirely domestic in origin and execution.  If there was an international link, one could easily envision nightmare scenarios about Russia's international response.

3)  How screwed is the North Caucasus?  They were already pretty screwed because of the Putin administration's attempts to crack down on secessionist groups in the region.  I seriously doubt that this attack is going to cause Russian leaders to rethink their strategy.  If anything, a doubling-down approach is the likely outcome.   

4)  Hey, Europe might be relevant again!!  The New York Times' Steve Erlanger reported on the latest Brussels Forum meeting, at which European security and foreign policy officials kept saying, "we're relevant!!"  Given that the highest-ranking U.S. attendee was an Assistant Secretary of State, I'm pretty sure that U.S. officials didn't think that dog would hunt ex ante.  A Russia ready to lash out, however, is guaranteed to force more transatlantic consultations. 

5)  Obama's counter-terrorism policies don't look so bad in comparison.  This is unfair -- the process matters just as much as the outcome, and it might be that the Obama administration is just luckier than the Medvedev/Putin administration.  Still, the comparison will be made (though Michelle Malkin attempts to link the attacks to Obama's weaknesses on counterterrorism). 

Developing....

Posted By Daniel W. Drezner

On the 30th 31st anniversary of the Iranian Revolution, lots of people are clearly out in the streets of Tehran and other major Iranian cities.  Andrew Sullivan has/will have posts galore on the Green protests -- and I have every confidence that the Leveretts will have a post up soon minimizing the significance of said protests (UPDATE:  they do not disappoint). 

As I've posted on Iran, I've been intrigued by all of the commenters arguing back and forth on the precise power of the Green movement.  Some have argued that the current regime is doomed; some have argued that it's much ado about nothing. 

So, here's my question to those readers -- what observable evidence would convince you that your analysis is wrong?  If supporters of the Green Revolution movement only saw evidence of anti-government protestors in the hundreds, would that convince you that the regime will be standing for quite some time?  For those who believe the regime is here to stay, would millions in the streets chanting "Death to the Dictator" make you think twice about your assumptions? 

Think hard about this question and post your answer in the comments. 

UPDATE:  Just to provide an example, this excerpt from a NIAC post bolsters the Leverett position on Iranian state strength:

It’s still very early to be drawing conclusions from today’s events, as people are still out in the streets.  But one thing I’m struck by is just how much the government has been in control today.  Sure, they chartered busses and lured tens of thousands to the official government rally with free food, but they have also managed to keep the opposition activities largely on their terms today.

The government’s strategy is to depict the protesters as a small group of rioting thugs, burning trash cans and disrupting order for their own radical, “foreign-backed” agenda.  Toward that end, they have been very effective at keeping the demonstrations today dispersed and nervous — less of the “million man march” and more like Seattle WTO protesters.  Above all else, the ruling elites know the danger of big crowds: strength in numbers takes over and individuals no longer feel like they will be held accountable for their actions, thus their demands get more radical and their tactics more extreme; this forces a harsher backlash from security forces, possibly including using lethal force.  And then that’s the ball-game.  That’s exactly what happened in 1979, and Khamenei learned that lesson well enough that he’ll do his utmost not to repeat it.

So today’s events (like previous ones) have seen security forces disrupt crowds before they can coalesce into a large group, arresting numerous individuals as a way of controlling the crowds before they get out of the police’s hands....

Interestingly, many accounts we've been hearing involve protestors being hesitant to wear green, flash a V for victory sign, or even chant openly out of fear of backlash from security personnel.  In some cases, particularly at Azadi square where Ahmadinejad addressed the official government rally, security forces scanned the crowd for any signs of "green" activity, and quickly pulled people out of the group as soon as they were given cause. 

Posted By Daniel W. Drezner

Over in Ukraine, Viktor Yanukovich's apparent narrow victory over the Yulia Tymoshenko has had the anticipated effect inside the U.S. foreign policy community -- there's been an exercise in massive navel-gazing.  I'm therefore going to make things worse by engaging in meta-navel gazing (usually something I only consider doing with you-know-who).

Let's start with the Century Foundation's Jeffrey Laurenti

Yanukovych's election yesterday, narrowly edging out prime minister Yulia Tymoshenko in the run-off, spotlights the folly of Washington conservatives who pressed single-mindedly to lock Ukraine (and Georgia) into the Western military alliance during the Bush administration.  They discounted deep ambivalence among Ukrainians themselves and sought to override overt opposition from NATO's leading members in western Europe. 

Like insects trapped in Baltic amber since dinosaur days, American conservatives remained frozen in a comfortingly simple cold-war view of the world:  Russia is incorrigibly suspect and must relentlessly be hemmed in by American power. 

That sounds like a cue.... yes, let's click over to The American Interest's Walter Russell Mead

The apparent victory of Viktor Yanukovych in yesterday’s Ukrainian presidential election is yet another setback to the idea that the world is rapidly becoming a more democratic place....

In hindsight, the choice that we made to extend NATO farther east in gradual steps might have been a mistake.  Russia hates NATO expansion and always has.  To some Russians it looks like the inexorable approach of a hostile alliance that endangers the motherland; to others it is a constant humiliating reminder of Russian weakness and the west’s arrogant presumption after 1989.  The expansion was annoying when it was limited to the former Warsaw Pact Soviet allies; it was maddening and infuriating when it extended to territories that were once part of the USSR like the three Baltic republics of Lithuania, Estonia and Latvia.  The prospect of a new wave of expansion to include Georgia and Ukraine, and push right up to the Russian frontier, was a worst case scenario nightmare for Russia.

If we were going to expand NATO eastward, we probably should have done it all at once, making agreements in principle and establishing basic interim security treaties with those countries whose actual entry might have to be delayed.  What we’ve done instead is like pulling a bandage off tiny bit by bit, endlessly prolonging the agony.  We should have ripped the whole thing off twenty years ago.  (We should have also thought much more seriously than we ever have about the likelihood that expanding NATO probably ultimately entailed bringing the Russians in as the only way to stabilize the security situation across Europe.)  Now the combination of Russian opposition (which, among other things, reduces European enthusiasm for expansion), geopolitical instability (do we want to get sucked into a new Russia-Georgian war?) and the general decline of US interest in Europe make a strong new push for expansion unlikely — even if the Yanukovych government wanted to join NATO.

So here we are: stuck with a security fault line in Europe, while the Russians will continue to fish where there aren’t any signs.

Both of these posts suggests way too much focus on the immediate implications of the election -- a president more favorably disposed towards Moscow. 

I think this is one time when the mainstream media actually brings greater value-added to the table.   The New York Times' Clifford Levy makes an intriguing suggestion in this news analysis -- that the process of Ukraine's election is more significant than Yanukovich's victory

[T]he election won by the candidate, Viktor F. Yanukovich, was highly competitive, unpredictable and relatively fair — just the kind of major contest that has not been held in Russia since Mr. Putin, the prime minister, consolidated power.

On Monday, for example, European election monitors praised the election that was held Sunday, calling it an “impressive display” of democracy. Ukraine's election, in other words, did not follow the Kremlin blueprint and, if anything, seemed to highlight the flaws in the system in Russia. As such, it presented a kind of alternative model for the former Soviet Union....

[Analysts said] that while the public ousted the Orange government, it did not want to do away with all aspects of the Orange democracy. They said a backlash would occur if Mr. Yanukovich tried to crack down.

The Ukrainian model may have particular resonance now with recent rumblings of discontent in Russia.

Late last month, antigovernment demonstrations in Kaliningrad, a region in western Russia physically separate from the rest of the country, drew thousands of people and seemed to catch the Kremlin off guard. Some protesters chanted for Mr. Putin’s resignation, complaining about higher taxes and an economy weakened by the financial crisis.

And last week, a prominent politician from what had been perceived as a puppet opposition party unexpectedly turned on the Kremlin and lashed out at Mr. Putin’s domestic policies. “Is opposition and criticism dishonest?” said the politician, Sergey Mironov. “In a civilized society, this is the duty and goal of the opposition.”

It is highly unlikely that Russia will soon have Ukrainian-style openness. The question now is, what will be the long-term impact across the former Soviet Union if Ukraine can follow its successful election with a relatively peaceful transition to a Yanukovich administration?

That's far from guaranteed, if Tymoshenko's latest actions are any indication.  And the past is not necessarily encouraging -- Belarusian strongman Alexander Lukashenko won free and fair elections the one time they were held in Belarus, back in 1994. 

Still, this is an outcome that should have democracy activists pretty pleased with themselves -- and members of the foreign policy community less obsessed with the international relations version of horse race politics. 

Posted By Daniel W. Drezner

Every fifth Israeli is twice as poor as the average person in OECD member states. Most of the poor come from Arab and ultra-orthodox communities, where poverty rises to 50 percent and 60 percent, respectively.

From a Ha'aretz story on Israel's membership application to the Organization for Economic Cooperation and Development

For more information, check out the OECD's 2009 survey of Israel, and OECD Secretary-General Angel Gurria's remarks.  Given David Brooks' recent column, I find it particularly interesting that Gurria said, "firms are overly hampered by regulation, especially for start-ups."

As my boss U.S. envoy Stephen Bosworth arrives in Pyongyang, I think it's worth noting that the North Korean government has not been endearing itself to its citizenry.  Hmmm... let me rephrase that -- the DPRK government has been acting with even more disregard fo its citizens than usual. 

The nub of the problem has been a currency revaluation/reform in which North Korean citizens will be forced to trade in their old notes for new ones -- and each citizen is limited in the amount they can exchange.  This move was designed to do two things:  lopping off a few zeroes of the North Korean won, and flushing out private traders along the Chinese border who are sitting on currency notes that will soon be worthless

It appears, according to AFP, that the DPRK regime has finally come up with a move that actually roils their population

Amid reports that some frustrated residents have been torching old bills, South Korean aid group Good Friends said authorities have threatened severe punishment for such an action.

Many residents would burn worthless old bills rather than surrender them to authorities, in order to avoid arousing suspicions about how they made the money, Good Friends said.

The banknotes carry portraits of founding president Kim Il-Sung and his successor and son Kim Jong-Il. Defacing their images is treated as a felony.

With nascent private markets for food collapsing because of the currency reform, citizens are finding it difficult to obtain basic staples. The U.N.'s Food and Agriculture Organization is already projecting another grain shortage for the country

Over at the U.S. Institute for Peace, John S. Park does a nice job of explaining the political economy effects of this currency move

As North Korean people in key market-active regions benefited from growing commercial interactions, low- to high-level DPRK officials figured out ways to get a cut of the money made. These officials used most of these bribes (viewed by traders as a "cost of doing business") to line their own pockets, but also used a portion of these for their respective organization's operating budget. With less to skim from the markets due to this revaluation, these officials will have funding gaps to fill. Given that these officials also enjoyed a higher standard of living, the discontent of the North Korean people will be aligned with these "skimming" officials. New groups of losers from this revaluation may be more advanced and better organized than protesters during previous periods of government-initiated economic and currency reforms....

If the DPRK government had improved and restored the inconsistent Public Distribution System and other public services on a national basis (a massive undertaking), a revaluation may have triggered greater state control by minimizing the benefits from the non-formal market system and making the North Korean people dependent on the state again. It does not appear that the DPRK government has improved these national systems. In an apparent effort to restore discipline through this revaluation, the DPRK government may have initiated a period of economic, social, and political destabilization by undermining a widely used coping mechanism for the people, as well as a growing number of officials.

[So a buckling DPRK regime is a good thing, right?--ed.]  From a nonproliferation perspective, not so much, no.   

Any domestic instability in North Korea is bad for Bosworth, the Six-Party Talks, and nonproliferation efforts in general.   The June uprisings in Iran have led the Iranian regime to adopt a more hardline position on the nuclear issue, both to bolster the conservative base and engage in "rally round the flag" efforts.  I see no reason why this logic would not apply to North Korea as well -- indeed, domestic instability is the likely explanation for Pyongyang's bellicose behavior earlier this year.

Developing.... in a very disturbing way.    

UPDATE:  My FP colleague Tom Ricks has more

Daniel W. Drezner is professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.

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